UK Gilt Yields Surge as Iran War Sparks Rate Hike Frenzy

2026-03-23 08:39 By Joana Ferreira 1 min. read

The UK’s 10-year gilt yield surged above 5%, reaching its highest level since July 2008, as the Middle East conflict sent energy prices soaring and intensified expectations of aggressive Bank of England rate hikes.

Shorter-term 2-year yields jumped above 4.6%, a peak since February 2024, while 30-year yields hit 5.6%, the highest since September 2025.

British bonds have been among the worst performers since the US-Israel strikes on Iran, with the UK’s heavy reliance on imported energy amplifying vulnerability to supply shocks.

Markets now price in four quarter-point BoE hikes this year, a stark reversal from pre-conflict expectations of two rate cuts, as policymakers pledge to combat inflation.

The spike in borrowing costs is straining the government’s fiscal targets, prompting Prime Minister Keir Starmer to call an emergency meeting with BoE Governor Andrew Bailey on Monday to address the crisis.



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